NeighborWorks of Western Vermont (NWWVT) of West Rutland, Vermont, (formerly Rutland West Neighborhood Housing Services) has developed an anti–predatory lending consumers’ guide that warns consumers against predatory-lending practices.

Incorporated in 1985, NWWVT began as housing rehabilitation specialists working with low-income residents in four Rutland County towns. Over time, the organization expanded to include home-ownership education and financing, financial counseling, foreclosure intervention, emergency-shelter funding, which includes aid for the mentally disabled, and community development projects. It became a chartered NeighborWorks organization in 1993. Services now are offered to any resident of the 28 towns within Rutland County.
 
NWWVT also provides NeighborWorks Full-Cycle Lending services, including homebuyer education, pre- and postpurchase counseling, purchase and rehab lending, and foreclosure prevention. While most lenders are fair and just, some are not. These untrustworthy lenders take advantage of unknowing borrowers with the goal of taking away their homes or other assets. Predatory lenders do not take into consideration whether a loan is affordable for a borrower, which oftentimes results in financial hardship.
 
NWWVT thus developed a consumers’ guide to provide clear, detailed information on predatory-lending practices. The goals are to educate borrowers and practitioners on the issue of predatory lending and define the terms and methods used by some lenders in creating predatory loans.

The Message.  The guide explains and defines, in simple, straightforward language, the terms and methods that predatory lenders use to take advantage of unknowing borrowers. This includes “flipping,” charging high rates and fees, and “packing” extra costs. It then explains what victims of predatory lending should do (such as contact their lending institutions), and identifies other organizations that can help, including HUD counseling agencies, the Vermont Department of Banking, the state attorney general’s office or a law practice familiar with predatory lending.

Counseling.  Borrowers who call NWWVT and feel they are victims of predatory lending are directed to its foreclosure-prevention program, where staff guide them through several steps. The first is opening the lines of communication with the borrower and his or her financial institutions. NWWVT helps the borrower understand his or her situation, provides the tools needed to make decisions regarding the financial situation, and coordinates a plan. With the borrower’s permission, NWWVT contacts the primary creditors and explains its role as facilitator.
 
The second step is creating a personal business plan for the customer. The borrower defines the factors contributing to his or her financial difficulties, and NWWVT helps the borrower make changes. This plan is used not only to restore the confidence of creditors, but also as a guide for the borrower.
 
Third is negotiating a loan workout. NWWVT has a variety of flexible financing tools and construction-management expertise to blend into a work-out. Once a solid plan is created, the borrower and NWWVT approach creditors. Successful plans prevent the borrower from losing the home, but require cooperation from the lender and commitment from the borrower.

Special Loan Product.  NWWVT is one of 10 sites participating in a national home-equity, loss-protection (HELP) initiative, organized through NeighborWorks America, Freddie Mac, and Wells Fargo Home Mortgage. Participating in the initiative allows NWWVT to refinance predatory loans using a special, more-affordable, loan product.

Marketing.  NWWVT distributes the anti–predatory lending consumers’ guides to consumers at homebuyer seminars and to practitioners at NeighborWorks America and Local Initiatives Support Corporation (LISC) trainings. The guides also are mailed to local and statewide lending partners, and given to NWWVT foreclosure-intervention or prevention loan customers.

Program Costs.  The obvious expenses associated with the guide are printing and distribution. However, underlying costs may emerge as NWWVT becomes known as the place to go with predatory-lending issues. In predatory-lending situations, the counseling and loan workout can be complicated and time consuming, resulting in substantial increases in staff time and costs.

• Since creating the consumers’ guide, NWWVT has received a steady stream of customers with predatory-lending issues. Out of 70 foreclosure-prevention cases, 10 to 15 percent have predatory components.
   
• The anti–predatory lending guide has definitely increased awareness of predatory lending and successfully identified to both customers and lending professionals that NWWVT is a place to go for help. More and more customers are contacting the agency directly, and lenders and other nonprofit partners are referring borrowers to NWWVT for assistance.
   
• This project has helped NWWVT build both local and statewide partnerships. New lending partners are interested in developing useful loan products for victims, and other partners are providing funding for materials and staff resources.

• When creating a guide for consumers on any lending topic, use simple, easy language. Remember who your audience is, and remember the goals are to educate the borrower and help simplify the process.
   
• For any agency taking on the issue of predatory lending, be prepared. The process of helping these borrowers is complicated and lengthy, and will most likely require an increase in staff resources. The local organization needs specific intake forms and methods for dealing with predatory loans so staff can discover the intricacies of the loan, and determine whether it is in fact “predatory.”
   
• Local organizations must also realize that many loans are not “predatory,” just painful. These borrowers need help too. Staff may do a great deal of work and still find only little ground for a predatory-lending case. Instead, it may be that the borrower simply made a poor decision or needs help managing debt. Anti–predatory lending programs are really part of a larger picture of helping homeowners maintain home ownership. Borrowers have many different issues and circumstances, and a local organization must be able to respond with many different solutions.
   
• Find partners who are truly interested in combating predatory lending. Nationally, this is becoming a popular topic; though most businesses and organizations are interested, it is not always easy to find partners with serious commitment. Be clear on local organization needs and expectations, and seek partners who will provide reliable services.

Agency interview with: Jason Zavala